Document: EB 2011/104/R.22/Rev.

1
Agenda: 10(c)(iii)
Date:
Distribution:
13 December 2011
Public
E
Original: English

President’s report

Proposed loan to the Republic of India for the

Integrated Livelihoods Support Project

Note to Executive Board representatives

Focal points:
Technical questions: Dispatch of documentation:

Nigel Brett Kelly Feenan

Country Programme Manager Head, Governing Bodies Office
Tel.: +39 06 5459 2516 Tel.: +39 06 5459 2058
e-mail: n.brett@ifad.org e-mail: gb_office@ifad.org

Executive Board — 104th Session

Rome, 12-14 December 2011

For: Approval
 EB 2011/104/R.22/Rev.1

Contents
Abbreviations and acronyms ii
Financing summary iii
Recommendation for approval 1
I. Strategic context and rationale 1
A. Country and rural development and poverty context 1
B. Rationale and alignment with government priorities and RB-
COSOP 1
II. Project description 2
A. Project area and target group 2
B. Project development objective 3
C. Components/outcomes 3
III. Project implementation 4
A. Approach 4
B. Organizational framework 4
C. Planning, monitoring and evaluation, and learning and
knowledge management 5
D. Financial management, procurement and governance 6
E. Supervision 7
IV. Project costs, financing, benefits 7
A. Project costs 7
Project Costs by Component 7
B. Project financing 8
Financing Plan by Component 8
C. Summary benefit and economic analysis 8
D. Sustainability 8
E. Risk identification and mitigation 9
V. Corporate considerations 9
A. Compliance with IFAD policies 9
B. Alignment and harmonization 9
C. Innovations and scaling up 9
D. Policy engagement 10
VI. Legal instruments and authority 10
VII. Recommendation 10

Annex
Negotiated financing agreement 11

Appendices
I. Logical framework

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Abbreviations and acronyms

AWPB annual workplan and budget
COSOP country strategic opportunities programme
CPCU central project coordination unit
ILSP Integrated Livelihoods Support Project
INR Indian rupees
M&E monitoring and evaluation
PSWMD Project Society Watershed Management Directorate
RDD Rural Development Department
SKGFS Sahastradhara Kshetriya Grameen Financial Services
UGVS Uttarakhand Gramya Vikas Samiti
UPASaC Uttarakhand Parvatiya Aajeevika Sanvardhan Company

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Republic of India

Integrated Livelihoods Support Project

Financing summary

Initiating institution: IFAD

Borrower: Republic of India

Executing agency: Department of Rural Development, Government of

Uttarakhand

Total project cost: US$258.81 million

Amount of IFAD loan: SDR 56.7 million (equivalent to approximately

US$89.91 million)

Terms of IFAD loan: 40 years, including a grace period of 10 years, with a

service charge of three fourths of one per cent
(0.75 per cent) per annum

Contribution of borrower: US$48.02 million

Contribution of beneficiaries: US$10.97 million
Contribution of other financial
institutions: US$109.89 million

Appraising institution: IFAD

Cooperating institution: Directly supervised by IFAD

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Recommendation for approval

The Executive Board is invited to approve the recommendation for the proposed
financing to the Republic of India for the Integrated Livelihoods Support Project, as
contained in paragraph 50.

Proposed loan to the Republic of India for the Integrated

Livelihoods Support Project

I. Strategic context and rationale

A. Country and rural development and poverty context
1. India has achieved remarkable economic progress in recent years, with an average
growth of 8.8 per cent between 2002/03 and 2007/08. India’s economy is the fourth
largest in the world. The country’s population is approaching 1.2 billion, and has a
growth rate of 1.4 per cent. A total of 72 per cent of India’s population lives in rural
areas. Poverty remains a major issue, with 41.6 per cent of the population living on
less than US$1.25 per day. India has 33 per cent of the world’s poor people.
2. Distribution of the benefits of economic growth to poor rural people has been limited
by: inadequate physical and social infrastructure; poor access to services; low
investment; a highly stratified and hierarchical social structure, characterized by
inequalities in assets, status and power; and ineffective implementation of pro-poor
programmes, owing to governance failures. There is now widespread recognition
that, without inclusive growth, the social and political consequences of rising
inequalities could be severe. About one third of India’s districts are affected by civil
unrest and left-wing terrorism, which represent the main national security threats.
3. Agricultural wage earners, smallholder farmers and casual workers in the non-farm
sector constitute the bulk of poor rural people. Within these categories, women and
tribal communities are the most deprived. In terms of gender deficit, India is ranked
114 by the World Economic Forum’s global gender gap index (2009). In addition,
about 300 million young people aged between 13 and 35 live in rural areas, most of
them being forced to migrate seasonally or permanently, without the skills and
competencies required by the modern economy.
4. India’s Eleventh Five-Year Plan (2007–2012) aims to achieve inclusive growth in all
sectors and to double agricultural growth from 2 to 4 per cent per annum by
expanding irrigation, improving water management, bridging the knowledge gap,
fostering diversification, increasing food production to ensure food security,
facilitating access to credit and enabling access to markets. The mid-term
assessment of the plan, released in July 2010, underscores the urgency of
increasing capital formation and investments in agriculture, as well as improving
access to water and good quality seed, replenishing soil nutrients, expanding
agricultural research and extension, reforming land tenancy systems and facilitating
agricultural marketing.

B. Rationale and alignment with government priorities and

RB-COSOP
5. The Integrated Livelihoods Support Project (ILSP) is a direct response to a formal
request from the Government of India to scale up successful rural development
programmes in the State of Uttarakhand, and is based upon a concept note
prepared by the Government of Uttarakhand. The state government has recently set
out its plans for the broad agricultural sector in the new 2011 Uttarakhand

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agriculture policy. The project has been designed to support this policy, especially
with respect to food security and agricultural diversification.
6. The project is fully aligned with IFAD’s new country strategic opportunities
programme for India (COSOP) and with its two strategic objectives: (i) increased
access to agricultural technologies and natural resources; and (ii) increased access
to financial services and value chains. The project concept is included in Appendix VI
of the COSOP (May 2011).
7. The specific technical rationale for the project is based on recognition of the
potential for reducing poverty by developing agricultural livelihoods in the State of
Uttarakhand. In order to do this, the deterioration of productive infrastructure needs
to be halted, and farm labour needs to be made more productive and farming more
remunerative. This will provide incentives for people to invest their time and
resources in agriculture. Despite the disadvantages that agriculture faces in the hill
areas, Uttarakhand has the advantage of cooler temperatures at higher altitudes,
allowing production of out of season vegetables and temperate fruits. The
horticultural sector is less developed than in the other hill states, so there is
considerable potential for growth, as there is with other niche products such as
spices, medicinal and aromatic plants, and nuts. Through an integrated approach,
and through building on the lessons from existing projects, the project design seeks
to realize these opportunities for agricultural development in Uttarakhand.
8. The project has been designed to converge with existing and planned government
programmes such as the Government-financed National Rural Livelihoods Mission
(NRLM). NRLM will start operations in Uttarakhand in 2012 and will be responsible
for forming and supporting self-help groups. ILSP will provide complementary
livelihood support for self-help group members, many of whom will also join ILSP
groups.

II. Project description

A. Project area and target group
9. The project area is the State of Uttarakhand. Uttarakhand is a small hill state in the
north-west of India covering 54,483 km2, with a population of 8.5 million (2001
census). Nine of its 13 districts are classed as hill districts, covering 77 per cent of
the area of the state, but with only 44 per cent of the population. Livelihoods are
still predominantly rural, and most economic and population growth has been in the
plains, which are becoming industrialized.
10. Uttarakhand is one of the poorest states in India, with 41 per cent of the population
below the poverty line in 2004–05 (Planning Commission). Data from the population
census show that 18.6 per cent of the population in project districts belongs to
scheduled castes. The major driver of rural poverty is the difficult mountain
environment. Although the vast majority of households have land, land holdings are
very small (on average 0.8 hectares). Tiny terraced plots on steep hillsides make
mechanization virtually impossible. Shallow and immature soils require high levels of
organic matter, but yields are very low. There is little use of modern varieties,
mineral fertilizers and other inputs. Only about 10 per cent of the land in hill
districts is irrigated. Most households keep cattle or buffalo, but improved
crossbreds are relatively scarce, and there is minimal investment in feeding and
health care. Agriculture is largely for subsistence, but very few households are able
to produce enough food to last for more than three or four months. People rely on
non-farm earnings and safety net programmes.
11. The priority target groups under the project include: (i) small rural producers;
(ii) women; (iii) scheduled caste households; and (iv) young people. A total of
143,400 beneficiary households will be reached by the project. The project will
adopt a saturation approach to targeting by covering complete sub-districts (blocks)
or microwatersheds. Any households in the selected blocks or microwatersheds will

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be able to participate in the project, although the delivery of project services via
farmer groups is less likely to be attractive for the richest 20 per cent of households.
The project will ensure that benefits flow directly to women by maintaining a
proportion of at least 50 per cent of women in all producer groups formed by the
project. Furthermore, in line with the Uttarakhand Government policy of ensuring
that 20 per cent of project resources flow to scheduled caste households,
20 per cent of producer groups set up by the project will consist of scheduled caste
households and other particularly vulnerable households.

B. Project development objective

12. The overall goal of ILSP is to reduce poverty in the State of Uttarakhand. The
project development objective is to enable 143,400 rural households to take up
sustainable livelihood opportunities that are integrated with the wider economy.

C. Components/outcomes
13. Food security and livelihood enhancement. This component will be
implemented by Uttarakhand Gramya Vikas Samiti (UGVS). UGVS is a not-for-profit
society established by the Government of Uttarakhand to implement the
Uttarakhand Livelihoods Improvement Project for the Himalayas. UGVS will support
crop and livestock production for food security, and develop higher value cash crops
and other products (such as rural tourism) to provide cash incomes. Crop and
livestock production will be developed through support to producer groups and
higher level livelihood collectives formed by a number of producer groups. To scale
up enterprises generating cash incomes and to introduce new income sources, the
project will also improve access to markets through a value chain approach and the
provision of physical infrastructure for market access. The value chain approach
involves market/subsector studies, introduction of new technologies, improved
market linkages, skills development, and product development and promotion.
These activities will cover approximately 93,800 households in 17 blocks in five
districts. The project will also improve access to employment in the non-farm sector
by supporting vocational training linked to job placement, with a target of 10,000
training places to be offered.
14. Participatory watershed development. This component will be implemented by
the Project Society Watershed Management Directorate (PSWMD) and will use
processes that have been established through a series of watershed development
projects in the state, but with an increased focus on food security, livelihoods and
market linkages. It will protect and improve the productive potential of the natural
resources in selected watersheds, alongside the promotion of sustainable agriculture
through the formation of producer groups and livelihood collectives, and improved
access to markets. The component will cover a total of 41 microwatersheds
occupying an area of 125,000 hectares in six clusters in six districts, with a
population of 39,600 households. It will complement the ongoing watershed
development programme funded by the World Bank and the Government of India.
The component also takes into account the availability of required PSWMD
institutional capacity in the selected project districts.
15. Livelihood financing. This component will be implemented by the Uttarakhand
Parvatiya Aajeevika Sanvardhan Company (UPASaC). UPASaC is a social venture
capital company and was established by the Government of Uttarakhand under
section 25 of the Companies Act to promote and finance rural enterprises. Despite
making substantial strides in financial viability, banks have not been able to provide
significant numbers of poor households with basic financial services. In order to
address this, the activities under this component include: (i) banking support, in
particular capacity-building and expansion of branches of Sahastradhara Kshetriya
Grameen Financial Services (SKGFS) – a rural finance institution; (ii) risk
management, in particular piloting and scaling up insurance services; (iii) financial
inclusion initiatives, for example delivering training to livelihood collectives in how to

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operate as bank agents and dedicated literacy training; (iv) provision of

development finance through UPASaC, including loan and quasi-equity funding; and
(v) establishment of cost support to UPASaC.
16. Project coordination and monitoring. Each implementing agency – UGVS,
PSWMD and UPASaC – will have its own project management unit headed by a
project director. To provide overall coordination, the state executing agency, the
Rural Development Department (RDD), will set up its own central project
coordination unit (CPCU), headed by a chief project director. The CPCU will have two
units: (i) a finance unit; and (ii) a planning and monitoring and evaluation unit.

III. Project implementation

A. Approach
17. Given that the ILSP aims to scale up existing rural development projects in
Uttarakhand, the strategy has been to build upon the lessons learned from these
projects.
18. The project strategy will be to adopt a two-pronged approach to building livelihoods
in the project area. The first line of action is to support and develop the food
production systems that remain the main source of livelihood for most households.
This involves improving technologies for the production of traditional food crops and
livestock, and developing supporting services for input supply and the marketing of
any surpluses. To make food production more secure the project will contribute to
watershed development to conserve water and soil resources. The project will also
support the production of fodder and other non-timber forest products in community
forest areas.
19. The second main thrust of the project is to generate cash incomes via the
introduction and expansion of cash crops. Cash crops will be grown on a significant
scale for markets outside the state. Production of off-season vegetables, such as
potatoes, tomatoes and peas, and some fruit and spices, is already substantial. This
can be expanded through improved technologies and the development of new
production areas, with returns to farmers improved through better marketing and
value addition. It should be possible to develop the production of new crops and
products (such as nuts and aromatic plants) for growing external markets. The
project will also support non-farm livelihoods, especially community involvement in
rural tourism. Many people migrate to jobs outside the hill areas, and the project
will support vocational training to help people obtain more remunerative
employment.

B. Organizational framework
20. The Government of Uttarakhand will establish a state-level project steering
committee chaired by the Chief Secretary. The secretary of RDD will act as secretary
to the project steering committee. The committee will meet every six months to
review progress, provide overall guidance and policy support, and facilitate
interdepartmental coordination. Overall coordination is handled by the CPCU set up
within the RDD (see paragraph 16).
21. The project will be implemented by the three implementing agencies – UGVS,
UPASaC and PSWMD – each with a full–time project director. The implementing
agencies will be responsible for the day-to-day running of the allocated components.
22. The project steering committee will appoint a project management committee
chaired by the secretary of RDD and co-chaired by the secretary of PSWMD. The
Additional Secretary, Finance; the Chief Project Director (of the CPCU); the project
directors (of the three implementing agencies); and other implementing partners
will serve on the project management committee and the UGVS project director will
act as secretary. The main functions of the project management committee, which
will meet every quarter, include: (i) approving the annual workplan and budget

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(AWPB); (ii) reviewing physical and financial progress; (iii) reviewing progress
towards achieving outcome indicators; (iv) resolving implementation issues; and
(v) working towards achieving convergence between various government-sponsored
activities and ILSP activities.
23. The project will depend on a number of implementing partners for the
implementation of activities at the field level. These will include NGOs, producer
groups, livelihood collectives and watershed management organizations.

C. Planning, monitoring and evaluation, and learning and

knowledge management
24. The project will follow the existing planning process undertaken by the Forest and
Rural Development Department of the state government. In the third quarter of the
financial year, during the month of December, the CPCU will request the
Government to make budgetary provisions for the project based on AWPBs drawn
up by UGVS, UPASaC and PSWMD. A participatory process will be followed by
implementing agencies in drawing up the AWPBs. This exercise will also focus on
performance planning. Each agency will prepare its own procurement plan according
to its AWPB. The CPCU will collate the AWPBs and related procurement plans and
send the consolidated plan to the project management and steering committees for
approval in the month of February. The approved AWPB will then be prepared in the
IFAD AWPB format and sent to IFAD along with the procurement plans for approval.
The approved AWPB will be used in reviewing performance and progress during the
supervision missions.
25. The M&E system will collect data and information to measure performance and
progress towards objectives. It will also serve as a learning tool to gather
information for critical reflection on project strategies and operations. The M&E
exercise will support decision-making at various levels and provide a basis for
results-based management. Given that the principal components of the project will
be implemented by UGVS, UPASaC and PSWMD, the performance and progress of
the activities and outputs will be monitored by these agencies independently. Each
agency will draw up its own M&E plan within the overall M&E framework of ILSP. The
M&E unit in the CPCU will support this output and activity monitoring; it will
implement a programme of outcome and impact monitoring, as well as produce
consolidated reports on project progress and results, and coordinate overall learning
and knowledge management. The M&E framework of the project provides for output
monitoring, participatory M&E, process monitoring, outcome monitoring and impact
evaluation. Baseline, mid-term and completion impact surveys will be undertaken in
accordance with the IFAD Results and Impact Management System (RIMS).
26. The elements of the project learning system include monthly, quarterly and annual
review meetings; capturing information on progress; drawing lessons; and
identifying solutions for implementation constraints. IFAD, in cooperation with the
Government, will undertake a mid-term review in the fourth year of the project to
assess achievements and implementation constraints. A mutually agreed action plan
will be prepared based on the findings of the mid-term review. If needed, IFAD may
appoint, in consultation with the Government, an external agency to evaluate the
impact of the project. As the project reaches completion point, the CPCU will
prepare a draft project completion report in cooperation with IFAD and the
Government of Uttarakhand. IFAD and the Government will then carry out a project
completion review based on the information in the project completion report and
other data.
27. In the first year of the project, a project-level knowledge management strategy will
be prepared in line with the IFAD knowledge management policy. The project
website will be completed within the first year of implementation and used as a
knowledge sharing tool; it will also be linked to the IFADAsia website. Key
information from M&E studies, reviews and exposure visits, lessons and best

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practices, will be disseminated through knowledge products such as newsletters,

publications, case studies and reports.

D. Financial management, procurement and governance

28. Accounts. The project will maintain accounts and records in accordance with
internationally recognized accounting practices. It is proposed that the project
maintain its accounts using Tally financial software at all levels, in all implementing
agencies and at the CPCU. The CPCU will have a finance controller who will be
responsible for book–keeping for the CPCU, financial reporting to IFAD and other
stakeholders, coordination with auditors and internal auditors, payments, bank
operation, funds flow and coordination with finance staff of implementing agencies.
It is recommended that a Uttarakhand Government representative be appointed, in
consultation with IFAD, as deputy finance controller. He/she will be assisted by an
accounts officer. Each implementing agency will have its own finance controller who
will handle project-related responsibilities. The project will share the services of the
district-level financial staff of UGVS and PSWMD.
29. Flow of funds. The project will be funded from four sources: IFAD, Government of
India, beneficiaries and financial institutions. The CPCU will be responsible for
preparing the AWPB for the project and submitting it to the Uttarakhand
Department of Finance through the RDD. This AWPB (net of the beneficiary
contribution and contributions from financial institutions) will be included as a line
item in the RDD budget and will be presented to the state assembly for approval.
The IFAD loan proceeds will be provided to the Government of India, which will
channel funds to the Government of Uttarakhand through the conventional national
procedures for budgetary support to state governments.
30. In line with previous IFAD loans in India, loan funds will be delivered to a designated
account in the Reserve Bank of India and operated by the authorized
representative(s) of the Ministry of Finance. IFAD will pay an initial advance into the
designated account to cover approximately six months of estimated project
expenditure, and then replenish the designated account on the basis of withdrawal
applications submitted by the project through the state government to the
Controller of Aid Accounts and Audit in the Ministry of Finance. Upon approval by the
Uttarakhand state assembly, the budgetary allocation for the project (including
Government of India counterpart funds) will be released to the project in one or two
tranches. To avoid any delay in the flow of funds to the project, the chief project
director or finance controller of the CPCU must be vested with drawing and
disbursement powers by the Government of Uttarakhand. The funds will be
transferred from the designated account to the Uttarakhand State Treasury, and
from the latter to a project bank account opened and operated by the CPCU. Funds
will flow from this project account to sub-project accounts maintained by the three
project management units at UGVS, UPASaC and PSWMD.
31. While UGVS and UPASaC funds will flow from the sub-project accounts maintained
by their project management units to their district-level bank accounts, it is
expected that PSWMD funds will flow from the PSWMD sub-project account to bank
accounts maintained exclusively for the project at the divisional and district levels. A
large proportion of the funds will then flow from these bank accounts to designated
project bank accounts maintained by water and watershed management committees
that are part of the gram panchayats (local self-governments at the village level).
32. Audit. Each fiscal year the Government will have the project accounts audited in
accordance with the IFAD Guidelines on Project Audits (for Borrowers’ Use) and
Article IX of the General Conditions for Agricultural Development Financing,
submitting an audit report within six months of the end of each fiscal year. The
project will have a cost-effective and efficient internal audit mechanism. For UGVS
and UPASaC, the internal audit will be conducted by a member of their own
management staff. For PSWMD, the internal audit function will be outsourced to a

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firm of independent chartered accountants. The terms of reference will include key
aspects of financial management and procurement. The internal auditor will submit
quarterly reports simultaneously to the chief project director and the IFAD country
programme manager. Corrective follow-up action will be decided jointly by a
committee that includes the chief project director, the IFAD financial management
specialist and the internal auditor.
33. Procurement. Procurement will follow the procurement regulations of the
Government of Uttarakhand (with some project-specific amendments) where they
are consistent with the IFAD Project Procurement Guidelines. Should the national
regulations differ from IFAD’s procurement guidelines, the latter will prevail.

E. Supervision
34. The project will be directly supervised by IFAD. During the start-up phase, IFAD will
attend the national start-up workshop and participate in discussions on the project
approach and strategy. This is likely to involve leaders of project design missions
and a financial management specialist. The financial management specialist will also
provide implementation support to train project financial staff. Other implementation
support in the first year of the project may include assistance in setting up the M&E
system and drawing up training plans for the various components of the project. It
is envisaged that the first supervision mission will take place towards the end of the
first year of operations. It will include specialists in poverty targeting, and natural
resource and financial management. Once infrastructure works have started,
supervision missions may include production and marketing specialists. In addition,
day-to-day implementation support will be provided by IFAD’s country office in New
Delhi.

IV. Project costs, financing, benefits

A. Project costs
35. Based on current 2011 prices, project base costs are estimated at
US$247.28 million. Price contingencies add a further 5 per cent, making a total
project cost of US$258.81 million. The assumptions that underpin these costs
include: (i) a seven-year project period; (ii) price contingencies of 5 per cent per
year; (iii) a base Indian rupee (INR)/US$ exchange rate of INR 45/US$1; (iv) a
completion INR/US$ exchange rate of INR 52/US$1.

Project costs by component

Components (INR) (US$ million) % of total base cost
Total Total

A. Food security and livelihood enhancement 1,896,944 41.691 17

B. Participatory watershed development 4,020,325 88.359 36

C. Livelihood financing 5,211,460 114.538 46

D. Project management 122,799 2.699 1

Total base cost 11,251,528 247.286 100

Price contingencies 977,207 11.525 5

Total project cost 12,228,735 258.812 105

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B. Project financing
36. The project will be financed by: (i) an IFAD loan of US$89.91 million;
(ii) US$48.02 million from the Government of India; (iii) US$109.89 million from
banks as loans to enterprises belonging to groups set up by the project; and
(iv) US$10.97 million in contributions from beneficiaries. Project groups will also
benefit from convergence with other Government and NGO programmes.
Financing plan by component
(Millions of United States dollars)

Government IFAD Banks Beneficiaries Total

A. Food security and livelihood enhancement 7.036 32.936 4.810 44.783

B. Participatory watershed development 37.081 53.212 6.166 96.460

C. Livelihood financing 3.071 1.660 109.890 .3 114.624

D. Project management .839 2.106 2.945

Total project costs 48.028 89.914 109.890 10.979 258.812

Percentage of total 18.6 34.7 42.5 4.2 100.0

C. Summary benefit and economic analysis

37. ILSP is a seven-year project. The overall economic rate of return (EIRR) for the
project is 23 per cent. Sensitivity analysis shows that expected project performance
is robust. A 20 per cent increase in costs combined with a 20 per cent decrease in
benefits leads to a reduction of the EIRR to 13 per cent.
38. The total number of households benefiting from the project is estimated at 143,400.
On average, food production is expected to increase from 2,460 kg/household to
over 3,000 kg/household, excluding fruits, vegetables and spices. Increased
production of fruits and vegetables, along with livestock products, will help improve
human nutrition. It is estimated that, overall, farm incomes, including the value of
family labour, will increase from INR 29,418 to INR 45,116.
The promotion of tree and fodder cultivation is expected to have a positive impact
on natural resources by providing alternatives to cutting down trees. Enhanced soil
moisture will result in increases in cropping intensities from 124 per cent to
132 per cent at full development. No major shifts in cropping patterns are
envisaged, but the focus is on improved farming and agronomic practices and
production for market. Additional benefits will come from the project’s
capacity-building interventions. Benefits will also be derived from the improved
market access, increased volume of produce that can be sold and reduced
marketing costs.

D. Sustainability
39. The sustainability of project benefits is based on several assumptions. Firstly, the
adoption of improved livelihoods will be sustained providing they continue to be
profitable for households, and linkages for inputs and outputs are maintained. These
linkages should be sustainable providing they are, in themselves, also financially
viable for private sector actors and/or livelihood collectives. Secondly, facilities such
as watershed treatment plants, irrigation systems and market infrastructure will
need to be maintained by user groups. The participation of local government in
watershed development will help ensure the sustainability of such facilities. Thirdly,
capacity-building will result in sustained benefits providing the training delivered is
relevant and effective. Finally, improved access to financial services will be provided
by banks, insurance companies and other agencies. If these services are profitable,
they will also be sustainable.

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E. Risk identification and mitigation

40. The key risk to the achievement of the project’s objective is that high levels of
migration from the hill areas create a labour shortage for agriculture. The project
will address this by seeking to increase productivity in farming so that returns for
labour become competitive. The key risks in terms of project outcomes include
competition in external markets for cash crops, damage to crops by wild animals,
and an unfavourable policy environment for rural finance. With respect to the risk of
competition, Uttarakhand has high production potential compared with other hill
districts, and is near the urban markets in New Delhi. To mitigate the risk of wild
animal damage, the project will undertake a study to identify the most cost-effective
approaches, which could include growing crops that are less attractive to animals or
providing protection around intensively cropped areas. To spread the risks deriving
from unfavourable rural finance policy, the project will support a number of
alternative financing channels. None of the above risks have been identified as
having a high potential to hinder the achievement of project objectives.

V. Corporate considerations
A. Compliance with IFAD policies
41. The project is fully aligned with the IFAD Strategic Framework 2011–2015. It
complies with IFAD’s RIMS and the IFAD Targeting Policy (2007). The final design
document for the project also reflects the IFAD requirements for gender-sensitivity.
The project is consistent with the IFAD Climate Change Strategy (2010), in that it
focuses on building climate-resilient livelihoods and introducing risk reduction
measures. It also meets the terms of the IFAD Environment and Natural Resource
Management Policy (2011), in that many of the proposed activities are likely to
generate environmental benefits in the area of watershed development and forest
management. The project is classified as Category B, and hence no further
environmental assessment is considered necessary. The project also complies with
the provisions of the IFAD Rural Finance Policy (2009).

B. Alignment and harmonization

42. The project has been designed to support the Eleventh Five-Year Plan (2007–2012)
of the Government of India and the 2011 Uttarakhand agriculture policy. Areas of
alignment include the project focus on improving water management, fostering crop
diversification, increasing food production and food security, and facilitating access
to financial services and markets.
43. IFAD hosted a donor harmonization workshop at the IFAD India country office in
August 2011. The purpose of the workshop was to ensure the project was fully
harmonized with development initiatives in Uttarakhand. All major donors active in
India were invited. Participants at the workshop included representatives of: Asian
Development Bank, European Union, German Agency for International Cooperation,
United Nations Development Programme, United States Agency for International
Development and World Bank. The final design of ILSP was informed by workshop
discussions.

C. Innovations and scaling up

44. In line with the innovation agenda set out in the COSOP, the project design includes
support for climate–resilient agriculture and developing pro–poor rural finance
services. The project will work with Vivekananda Parvatiya Krishi Anusandhan
Sansthan, a research institution of the Indian Council of Agricultural Research, and
G.B. Pant University of Agriculture and Technology to test and disseminate
technologies appropriate to the needs of hill farmers. The project will scale up
(double the number of branches) SKGFS, which itself is a new model for the delivery
of microfinance. The project will also fund SKGFS to develop new products, such as
loans for agriculture. The project will work with insurance providers to offer new
types of insurance for rural people.

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45. As described in the COSOP, the project design is a scaling up of the Uttarakhand
Livelihoods Improvement Project in the Himalayas. The project will also scale up the
successful PSWMD watershed development programme. The drivers of scaling up
will be the financial incentives that will encourage smallholder farmers to adopt
viable new technologies, and the project institutions and partners who will act as
catalysts for scaling up. There is considerable scope for scaling up in Uttarakhand,
as the project will only cover approximately 25 per cent of the households involved
in agriculture in the state.

D. Policy engagement
46. The major policy issue that will impinge on the activities of ILSP concerns
agricultural marketing. Markets for farm products in India are in the process of
being liberalized, but it is still uncertain to what degree markets will be deregulated.
At the moment it appears that the mechanisms of control, such as the mandi
(wholesale market) and compulsory market taxes, will stay in place, but some
private sector actors will be allowed to bypass these mechanisms through direct
contracting of farmers. ILSP will carry out studies of marketing systems and
interventions in the market chain. These will generate valuable insights into how
markets work and what can be done to improve returns to producers, which will in
turn inform the debate on market policy.

VI. Legal instruments and authority

47. A project financing agreement between the Republic of India and IFAD will
constitute the legal instrument for extending the proposed financing to the
borrower. A project agreement will be entered into between the State of
Uttarakhand and IFAD. A copy of the negotiated agreement is attached as an annex.
48. The Republic of India is empowered under its laws to receive financing from IFAD.
49. I am satisfied that the proposed financing will comply with the Agreement
Establishing IFAD and the Lending Policies and Criteria.

VII. Recommendation
50. I recommend that the Executive Board approve the proposed financing in terms of
the following resolution:
RESOLVED: that the Fund shall make a loan on highly concessional terms to
the Republic of India in an amount equivalent to fifty-six million seven
hundred thousand special drawing rights (SDR 56,700,000), and upon such
terms and conditions as shall be substantially in accordance with the terms
and conditions presented herein.
Kanayo F. Nwanze
President

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Annex EB 2011/104/R.22/Rev.1

Negotiated financing agreement:

"Integrated Livelihood Support Project"
(Negotiations concluded on 29 November 2011)

Loan Number: ____________________

Project Title: Integrated Livelihood Support Project (the ―Project‖ or ―ILSP‖)

The Republic of India (the ―Borrower‖)

and

The International Fund for Agricultural Development (the ―Fund‖ or ―IFAD‖)

(each a ―Party‖ and both of them collectively the ―Parties‖)

hereby agree as follows:

WHEREAS:

(A) The Borrower has requested a loan from the Fund for the purpose of financing the
Integrated Livelihood Support Project described in Schedule 1 to this Agreement;

(B) The Project shall be carried out through the State of Uttarakhand pursuant to a
separate agreement of even date herewith between the Fund and the State (―the Project
Agreement‖);

NOW THEREFORE, the Parties hereto hereby agree as follows:

Section A

1. The following documents collectively form this Agreement: this document, the
Project Description and Implementation Arrangements (Schedule 1) and the Allocation
Table (Schedule 2).

2. The Fund’s General Conditions for Agricultural Development Financing dated 29

April 2009, as may be amended from time to time (the ―General Conditions‖) are
annexed to this Agreement, and all provisions thereof shall apply to this Agreement. For
the purposes of this Agreement the terms defined in the General Conditions shall have
the meanings set forth therein.

3. The Fund shall provide a Loan to the Borrower (the ―Financing‖), which the
Borrower shall use to implement the Project in accordance with the terms and conditions
of this Agreement.

Section B

1. The amount of the Loan is fifty six million seven hundred thousand Special Drawing
Rights (SDR 56 700 000).

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Annex EB 2011/104/R.22/Rev.1

2. The Loan is granted on highly concessional terms as defined in Section 5.01 (a) of
the General Conditions.

3. The Loan Service Payment Currency shall be the United States Dollars (USD).

4. The first day of the applicable Fiscal Year shall be 1 April.

5. Payments of principal and service charge shall be payable on each 1 June and
1 December.

6. The Borrower shall open and maintain a Designated Account denominated in

USD in the Reserve Bank of India for the Project. The Designated account shall be
operated by the Ministry of Finance.

7. There shall be a Project Account denominated in local currency opened and

operated by the Central Project Coordination Unit (CPCU), in a bank mutually acceptable
to the Lead Project Agency and the Fund.

8. There shall also be three Sub-Project Accounts, one for the benefit of each of the
following Project Parties: Uttarakhand Gramya Vikas Samiti (UGVS); Uttarakhand
Parvatiya Ajeevika Sanvardhan Company (UPASAC); Project Society of the Watershed
Management Directorate (PSWMD). All accounts shall be opened and maintained in
bank(s) mutually acceptable to the above Project Parties and the Fund.

9. The Borrower shall cause the State to provide an amount of approximately forty
eight million and twenty eight thousand United States Dollars (USD 48 028 000) to the
Project as counterpart financing.

Section C

1. The Lead Project Agency shall be the Rural Development Department (RDD) of the
Government State of Uttarakhand (The State), acting through its Central Project
Coordination Unit (CPCU).

2. The following are designated as additional Project Parties:

(a) Uttarakhand Gramya Vikas Samiti (UGVS);

(b) Uttarakhand Parvatiya Ajeevika Sanvardhan Company (UPASAC);

(c) Project Society of the Watershed Management Directorate (PSWMD);

(d) Any other stakeholder identified by the Project Management Committee in

agreement with the Fund.

3. The Project Completion Date shall be the seventh anniversary of the date of entry
into force of this Agreement.

Section D

The Loan shall be administered by the Fund and the Project supervised by the Fund.

Section E

1. The following is designated as an additional ground for suspension of this

Agreement: The Project Implementation Manual (PIM), or any provision thereof,
has been waived, suspended, terminated, amended or modified without the prior

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Annex EB 2011/104/R.22/Rev.1

agreement of the Fund and the Fund, after consultation with the Borrower, has
determined that such waiver, suspension, termination, amendment or
modification has had, or is likely to have, a material adverse effect on the Project,
and the Borrower has not taken any measures to remedy the situation;

2. The following are designated as additional general conditions precedent to

withdrawal:

(a) The Project Steering Committee (PSC) and the Project Management
Committee (PMC) shall have been duly established;

(b) The CPCU within RDD shall have been duly established;

(c) The Chief Project Director (CPD) of CPCU shall have been duly appointed;

(d) The Designated Account shall have been duly opened by the Borrower;

(e) The Project Account shall have been duly opened by the CPCU;

(f) The Project Agreement in form and substance acceptable to the Fund shall
have been duly concluded between the Fund and the State of Uttarakhand.

3. The following are the designated representatives and addresses to be used for any
communication related to this Agreement:

For the Borrower:

Secretary to the Government of India

Department of Economic Affairs
Ministry of Finance
North Block
New Delhi 110001, India
Facsimile : +91-11-23092039

For the Fund:

The President
International Fund for Agricultural Development
Via Paolo di Dono 44
00142 Rome, Italy

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Annex EB 2011/104/R.22/Rev.1

This Agreement, dated ________________, has been prepared in the English language
in six (6) original copies, three (3) for the Fund and three (3) for the Borrower.

REPUBLIC OF INDIA

____________________
Authorised Representative

INTERNATIONAL FUND FOR

AGRICULTURAL DEVELOPMENT

___________________
Kanayo F. Nwanze
President

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Annex EB 2011/104/R.22/Rev.1

Schedule 1

Project Description and Implementation Arrangements

I. Project Description

1. Target Population. The Project shall benefit small rural producers, women, scheduled
caste households, and youth in the State of Uttarakhand (the ―Project Area‖) in the
Republic of India.

2. Goal. The goal of the Project is to reduce poverty in the Project area of the State of
Uttarakhand.

3. Objective. The objective of the Project is to enable 143 400 rural households to take
up sustainable livelihood opportunities.

4. Components. The Project shall consist of the following Components:

4.1. Component 1: Food security and livelihood enhancement. Under this

component the Project shall support crop and livestock production for food security and
also develop higher value cash crops and off-farm activities to provide cash incomes.
This component shall comprise the following sub-components:

(a) Food Security and Scaling-up. Under this sub-component the Project shall:
(i) Set up Producer Groups (PGs) comprising households with an interest to
undertake similar basic livelihood activities at the village level. To
ensure full participation of the poorest, the Project shall also mobilize
Vulnerable Producer Groups (VPGs), comprising poorest households,
particularly those belonging to scheduled castes (SC).
(ii) Support clustering of PGs and VPGs into Livelihood Collectives (LCs).
LCs shall be the focal points to establish input supply linkages and
aggregate production for establishing market linkages.
(iii) Facilitate LCs to: (i) expand cultivation of higher value cash crops and
off-farm activities, such as community tourism; (ii) develop irrigation,
and water and soil conservation related infrastructures; (iii) move into
agribusiness by identifying crops with potential for expansion to wider
market.
(iv) Provide financing to PGs, VPGs and LCs to prepare and implement their
Food Security Improvement Plans and Agribusiness Up-scaling Plans.
(b) Market access. Activities under this sub-component shall include:
(i) Increasing access for hill producers to wider markets through sub-sector
development;
(ii) Supporting market infrastructure development through the
establishment of assembly markets close to production areas, and the
construction of roads, pathways, river crossings structures;
(iii) Supporting the establishment of farmers’ markets;
(iv) Establishing collection points where produce can be stored;
(v) Carrying out studies and workshops on market systems and market
actors;

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Annex EB 2011/104/R.22/Rev.1

(vi) Developing a market information system to deliver relevant and timely

information to farmers;
(vii) Building the capacity of farmers, partner non-governmental
organizations staff and project staff to execute market related
functions.
(c) Innovation and market linkage. Under this sub-component the Project shall
enter into agreements with qualified research and development agencies such
as Vivekanand Parvatiya Krishi Anusandhan Shala (VPKAS), G B Pant
University of Agriculture and Technology (GBPUAT), Uttarakhand Livestock
Development Board, Himalayan Action Research Centre (HARC), and the
Uttarakhand Bamboo and Fibre Development Board to carry out the testing
and dissemination of technologies and approaches to improve food security,
livelihoods and access to markets.
(d) Vocational training. Under this sub-component the Project shall finance a
study by the Manipal City and Guilds Joint Policy Advisor Group to identify
opportunities for the Project to support vocational training. The Project will
then finance implementation of a programme to provide vocational training
for youth from households living in the hills.

4.2. Component 2: Participatory Watershed Development. Under this component,

the Project shall protect and improve the productive potential of the natural resources in
selected watershed areas, as well as increase households’ incomes through sustainable
utilization and management of natural resources such as water, land and vegetation.
This component shall comprise the following sub-components:

(a) Participatory watershed management. Activities under this sub-component

shall include:
(i) Social mobilization and participatory planning of stakeholders at grass
root level including, inter alia, the local government Gram Panchayat
(GP), its Water and Watershed Management Committees (WWMCs),
Van Panchayats (community forest groups), PGs, VPGs as well as
individual beneficiaries.
(ii) Watershed developments and investments based on village plans and
priorities.
(b) Food security enhancement support. Under this sub-component the Project
shall:
(i) Promote food security. To this end, PGs shall be formed to introduce,
promote and disseminate improved technologies and farming practices.
Support for PGs shall follow a similar pattern to that proposed for
Component 1, with each PG drawing up a Food Security Improvement
Plan and receiving funding from the Project for its implementation.
(ii) Identify the market potential for specific agricultural produce; develop
collection centres and good storage facilities; create centres for value
addition of the raw produce; identify market linkages, develop market
information and logistic services.
(c) Livelihood up-scaling support. Under this sub-component the Project shall:
(i) Promote income generating activities and support VPGs. For this
purpose, VPGs shall be set up and shall be given sustained capacity
building, orientation and training to encourage their entrepreneurial
development. Each VPG shall draw up a Livelihood Improvement Plan
receiving funding from the Project for its implementation.

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Annex EB 2011/104/R.22/Rev.1

(ii)Support LCs for up-scaling income generating activities. In particular, LCs

shall be set up and supported in their activities through funding from
the Project.
(d) Institutional strengthening. Under this sub-component the Project shall
promote capacity building of WWMCs of the Gram Panchayat and community
based organizations, including but not limited to, PGs, VPGs and Village
Revenue Committees. To this end, NGOs shall be engaged to provide, inter
alia, technical advice and trainings.

4.3. Component 3: Livelihood financing. Under this component the Project shall
expand the outreach of basic financial services. This component shall comprise the
following sub-components:

(a) Banking support. Capacity development support to banks and expansion of

branch networks of Sahastradhara Kshetriya Grameen Financial Services
(SKGFS), a local rural finance institution and/or any other rural finance
institution of similar capacity. In order to develop banking support, the
following activities shall be carried out:
(i) Memoranda of Understanding (MOUs) shall be entered into by UPASAC
with the banks having a larger presence in the Project area;
(ii)Annual credit need assessments shall be carried out by LCs and field NGOs
and discussed with banks, Government programmes at annual district
and state-level workshops;
(iii) Training shall be imparted, by reputed bank training institutions, to the
branch and senior staff of the banks, especially in appraisal skills for
lending to PGs, LCs and larger social enterprises, but also in new
financing methods;
(iv) UPASAC shall contract SKGFS and/or any other rural finance institution
of similar capacity to provide financial services at the door step of the
clients through the establishment of additional branch offices and the
introduction of new financial products.
(b) Risk management. Piloting and scaling up of insurance services such as
weather risk insurance, cattle insurance, mutual health insurance.
(c) Financial inclusion initiatives. Facilitate LCs to become bank agents, and
provide training on financial products.
(d) Development finance fund. The Project, through UPASAC, shall fund
community enterprises whom shall meet eligibility criteria established in the
Project Implementation Manual. The investments provided by UPASAC may
take the following forms: loans, equity and quasi-equity, and viability gap
grants.
(e) Establishment cost support to UPASAC. UPASAC’s salary and overhead costs,
including consultant’s fees, will be supported by the Project in the initial 3
years and on a tapering basis thereafter.

4.4. Component 4: Project coordination and monitoring. The Project shall finance
the establishment of a CPCU within RDD which shall be responsible for the overall
coordination and monitoring of the Project. The CPCU shall be headed by a CPD and shall
have two Units: (i) Finance Unit; and (ii) Planning and M&E Unit. The CPCU shall
coordinate and monitor the activities carried out by the Project Parties, UGVS, PSWMD
and UPASAC under the Components thereto allocated. UGVS, PSWMD and UPASAC shall
each be headed by a Project Director (PD).

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II. Implementation Arrangements

5. Project Steering Committee (PSC)

5.1. Establishment and composition. The Government State of Uttarakhand shall

establish a state level Project Steering Committee (PSC) chaired by the Chief Secretary.
The Secretary of RDD shall be the Secretary of the Committee. The members of the PSC
shall include: (i) Forest and Rural Development Commissioner (FRDC); (ii) Principal
Secretary, Finance; (iii) Secretary, Watershed; (iv) Secretary, Agriculture; (v) Secretary,
Animal Husbandry; (vi) Secretary, Horticulture; (vii) Secretary, Industry; (viii)
Secretary, Forest; (ix) Principal Chief Conservator of Forests; (x) Chief Project Director,
Watershed Management Directorate; and (xi) Project Directors. Special Invitees to the
PSC may include, the Heads of concerned line departments, Chief General Manager-
NABARD, representatives of Confederation of Indian Industry (CII), Chambers of
Commerce, Khadi and Village Industry Board (KVIB), Uttarakhand Bamboo & Fibre
Development Board, Uttarakhand Organic Commodities Board, Convenor Bank of State
Level Bankers Committee and implementing partner NGOs.

5.2. Responsibilities. PSC shall meet once in six months to review Project progress,
provide overall guidance and policy support and to facilitate inter-departmental
coordination.

6. Project Management Committee (PMC)

6.1. Establishment and composition. The PSC shall establish a Project Management
Committee (PMC) chaired by the Secretary of RDD. The Secretary, Watershed shall be
Co-chairperson. The Additional Secretary, Finance, the CPD, PDs and Implementation
Partners (NGOs, Innovation Linkage Partners, etc.) shall be the members. The PD of
UGVS shall be the Secretary of the PMC.

6.2. Functions. The PMC shall meet every quarter and its main functions shall include:
(i) approving AWPBs together with PSC; (ii) reviewing physical and financial progress;
(iii) reviewing progress towards achieving outcome indicators; (iv) resolving
implementation issues; (v) working towards achieving convergence between various
government sponsored activities and Project activities.

7. Lead Project Agency (RDD)

7.1. The Rural Development Department (RDD) of the State of Uttarakhand shall be the
Lead Project Agency.

8. The Central Project Coordination Unit

8.1. Establishment and structure. A CPCU within the RDD shall be established headed
by the CPD. The CPCU will have two Units: (i) Finance Unit; and (ii) Planning and M&E
Unit.

8.2. Functions of the Finance Unit. The main functions of the Finance Unit shall include:
(i) formulate and sign the Subsidiary Agreements with UGVS, PSWMD, UPASAC;
(ii) organize PSC and PMC meetings; (iii) incorporate the budget requirements into the
overall budget of the Government of Uttarakhand; (iv) operate the Project Account for
timely release of funds to the Project Parties; (v) receive statements of expenditures and
supporting documentation related to funds released to the Project Parties and keep an
account of the funds released and utilized by UGVS, PSWMD and UPASAC; (vi) prepare
overall Project financial statements; (vii) prepare and submit the withdrawal applications
to the Controller of Aid, Accounts and Audit in the Ministry of Finance for onward

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transmission to IFAD; (viii) and ensure preparation and submission of annual audit
reports of the Project Parties to IFAD.

8.3. Functions of the Planning and M&E Unit. The main functions of the Planning and
M&E Unit shall include: (i) submit the consolidated AWPB for approval of IFAD, PMC and
PSC; (ii) prepare the annual procurement Plan and submit it to IFAD for approval;
(iii) prepare and submit consolidated progress reports annually and quarterly to
IFAD based on the progress reports submitted by UGVS, PSWMD and UPASAC; (iv)
undertake M&E and knowledge management activities related to the Project; (v) prepare
RIMS data for submission to IFAD.

9. Project Parties

9.1. Responsibilities. The Project shall mainly be implemented by the following Project
Parties as follows:
(a) UGVS, previously established for the implementation of the Livelihood
Improvement Project for the Himalayas (Loan No. 624-IN), shall implement
the Food Security and Livelihood Enhancement Component (component 1);
(b) PSWMD shall be duly established to implement the Participatory Watershed
Development component (component 2);
(c) UPASAC, previously established for the implementation of the Livelihood
Improvement Project for the Himalayas (Loan No. 624-IN), shall implement
the Livelihood Financing component (component 3).

10. Project Directors

10.1. Appointment and Tenure. UGVS, PSWMD and UPASAC shall each be headed by a
Project Director (PD) who shall be appointed by the State Government. IFAD shall be
notified of any changes of the PDs. In order to ensure continuity and smooth
implementation of the Project activities, as far as possible, the PDs will have a normal
tenure of three years. The PDs of UGVS and PSWMD shall be assisted by a core team
staff comprising agribusiness, finance, planning and monitoring and evaluation
specialists.

10.2. Responsibilities. PDs shall be responsible for the day to day operations including
the following functions: (i) ensure that UGVS, PSWMD and UPASAC carry out their
functions as set out in the Subsidiary Agreements; (ii) supervise and monitor the
activities of UGVS, PSWMD and UPASAC and their progress towards achieving physical,
financial and outcome related targets; (iii) oversee field operations related to the
respective Components and provide overall implementation guidance; (iv) operate the
Sub-Project Accounts; (v) recruit staff required for implementing the Project;
(vi) undertake project procurement; (vii) ensure that the Sub-Project Accounts are
audited annually in accordance with IFAD audit requirements and submitting the same to
CPCU; (viii) submit annual RIMS data to CPCU; and (ix) ensure that UGVS, PSWMD and
UPASAC receive required level of funding for carrying out the activities.

11. Subsidiary Agreements

11.1. UGVS, PSWMD and UPASAC shall each enter into a Subsidiary Agreement with
the State through the CPCU/RDD, acceptable to the Fund, which shall set out the terms
and conditions under which such Project Parties shall implement their respective
activities under each Project Component. The UGVS, PSWMD and UPASAC shall be
responsible for the day to day implementation of the allocated components. The
Establishment of Divisional Offices at the cluster/district level by the UGVS, PSWMD, and

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Annex EB 2011/104/R.22/Rev.1

UPASAC shall be need based. The main functions of UGVS, PSWMD and UPASAC shall
include: (i) coordinate and implement components’ activities, including procurement, in
consultation with IFAD and under the guidance of PSC; (ii) prepare AWPBs and annual
procurement plans and submit them to CPCU; (iii) finalize and execute partnership
agreements/contracts with NGOs, service providers and specialized institutions for
implementing various project activities; (iv) establish an effective M&E and MIS system
to track sub-component’s progress; (v) prepare and submit consolidated annual and
quarterly progress reports to CPCU; (vi) supervise and monitor their respective
component related activities and their progress towards achieving physical, financial and
outcome related targets; (vii) prepare financial statements and prepare statements of
expenditures for submission to CPCU; (viii) submit annual audit reports and RIMS data
to CPCU; and (ix) liaise with the State administration, line agencies and other Project
Parties to ensure coordination in project implementation.

12. District Committees

12.1. Establishment and composition. District Coordination and Monitoring Committees

shall be established in each district covered by the Project activities and shall be chaired
by the Chairman of the Zila Panchayat (elected head of the district government).
Members shall include the district Chief Development Officer, project staff (from UGVS
and/or PSWMD), partner NGOs staff, members of government line departments and
representatives of Gram Panchayats and other community based organisations. Block
Development Officers may also be members of this Committee. The Committee shall
coordinate project implementation at the district level and ensure linkages between the
Project, line agencies and other government agencies.

13. Project Implementation Manual (PIM)

13.1. The CPD, with assistance from the Project Parties, shall prepare a draft PIM for
approval by the PMC in consultation with the Fund. The PIM shall include procedures and
processes for Project implementation including, inter alia:

(a) Terms of reference for key Project staff;

(b) Terms of reference for NGOs recruited as service providers;
(c) Terms of reference for studies and surveys;
(d) Procurement processes; and,
(e) Terms of reference for external and internal audits of Project Accounts.

13.2. The PMC shall adopt the PIM substantially in the form mutually agreed with the
Fund and make amendments from time to time in agreement with the Fund.
13.3. The Borrower shall cause the Project to be carried out in accordance with the PIM.
In case of any discrepancies between the provisions of the PIM and those of this
Agreement, the provisions of this Agreement shall prevail.

14. Mid Term Review

14.1. The Lead Project Agency and the Fund shall jointly carry out a review of the
Project implementation no later than the fourth anniversary of the Project
Implementation Period (the ―Mid-Term Review‖) based on terms of reference prepared
by the Lead Project Agency and approved by the Fund. Among other things, the Mid-
Term Review shall consider the achievement of Project objectives and the constraints
thereon, and recommend such reorientation as may be required to achieve such
objectives and remove such constraints. The Borrower shall ensure that the agreed

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recommendations resulting from the Mid-Term Review are implemented within the
specified time therefor and to the satisfaction of the Fund. Such recommendations may
result in modifications to this Agreement or cancellation of the Financing.

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Annex EB 2011/104/R.22/Rev.1

Schedule 2

Allocation Table

1. Allocation of Loan Proceeds. (a) The Table below sets forth the Categories of Eligible
Expenditures to be financed by the Loan and the allocation of the amounts of the Loan to
each Category and the percentages of expenditures for items to be financed in each
Category:

Category Loan Amount Allocated % of eligible expenditure

(expressed in SDR) to be financed

I. Civil works 1 990 000 100% net of taxes,

government and
beneficiaries contributions
II. Watershed treatment 11 500 000 100% net of taxes,
government and
beneficiaries contributions
III. Vehicle, Equipment and 340 000 100% net of taxes and
Materials
government contributions
IV. Capacity building 20 470 000 100% net of taxes,
government and
beneficiaries contributions
V. Livelihoods Financing 540 000 100% net of taxes,
government and banks
contributions
VI. Service providers contracts 10 320 000 100% net of taxes and
government contributions
VII. Incremental salary and 5 880 000 100% net of taxes and
operating costs
government contributions

Unallocated 5 660 000

TOTAL 56 700 000

(b) The terms used in the Table above are defined as follows:

Civil works includes, but is not limited to, buildings, small-scale irrigation, roads
and trails, bridges;

Watershed Treatment includes, but is not limited to, construction of earth bunds,
water harvesting structures, check dams, terracing and levelling, diversion drains,
contour trenches, stone wall protection works, biological protection measures and
other watershed treatment works, and other minor village infrastructure;

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Capacity Building includes activities related to training, workshops, technical

assistance, surveys and studies, livelihood support, agri-business development
support, project allowance, management and information system (MIS),
geographic information system (GIS), as well as watershed experts to PSWMD;

Livelihoods Financing includes, but is not limited to, activities related to insurance
pilots and viability gap funding;

Service providers contracts includes activities related to NGO contracts;

Incremental salary and operating costs includes incremental salaries, allowances

and operation and maintenance costs, excluding existing Government salary costs
of the PSWMD.

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 Appendix EB 2011/104/R.22/Rev.1

Logical framework
Objective hierarchy Indicators Means of verification Assumptions
Goal Child malnutrition (under 5 yrs old: chronic, acute, Impact surveys (including Price of food does not increase relative to
Reducing poverty in hill districts of underweight)1 RIMS anchor indicators) at earnings.
Uttarakhand Household assets baseline, mid-term and
Food security completion No major natural disasters
Development objective: Enable 93,400 households report increase in income from sub- Annual outcome surveys Employment opportunities in other parts of
143,400 rural households to take up sectors supported by the project. India do not mean that so many of the
sustainable livelihood opportunities 93,400 hh report increase in income (expenditure) Impact surveys (including workforce migrates out of Uttarakhand
integrated with the wider economy Quality of housing improved for 93,400hh RIMS anchor indicators) at that farming is affected.
Access to water and sanitation improved for 53,400 hh baseline, mid-term and
Women’s empowerment - 93,400f women report completion
improvements in decision making, assets and mobility
SC h’holds comprise at least 20% of all hh benefitting
Outcomes:
70,000 farmers1 adopt improved technologies or increase Annual outcome surveys. Weather patterns do not change to the
103,800 households from hill in area irrigated by average of 0.15 ha KAP surveys extent that seriously hinders farming.
communities benefit from increased 70,000farmers increase farm yield &/or output by Food prices in hills do not fall to the extent
food production, greater participation average of 15%. that makes local production uneconomic.
and returns in markets for cash crops, 84,400 hh increase food self-sufficiency Markets for off season vegetables & other
tourism and new employment 5,000 hh establish new enterprises products not adversely affected by
opportunities. 5,000 hh expand existing enterprises. competition from imports or other areas.
18,000 hh report increased sales . Value chain studies Communications (road and telecom) are
9,000 producers1 use new marketing channels. Case studies of producer developed.
Increase in 5% of producers’ share of retail price. organisations Vocational skills acquired are relevant to
50% of producer organisations rated sustainable. VT reports & studies job market.
8,000 vocational training graduates1 gain employment.
Farming systems in 41 project Increase of 10% in vegetative biomass Watershed environmental As above plus
watersheds with a population of 36,600 Increase of 10% in water availability monitoring Treated watershed not damaged by
households become more productive, Improved performance by 220 GP Process monitoring of GP erosion originating in reserve forests.
and less vulnerable to erosion and 22,000 farmers1 adopting new technologies Annual outcome surveys GPs responsive to project & allocate
drought. Increase in farm yield & output by average of 15%. KAP surveys required resources.
4,500farmers increasesales of produce or use of new
market channels
Increased investment in market-led UPASAC investments total Rs90 million. Reports from UPASAC and Regulatory framework allows financial
opportunities by hill producers and their 40% increase in number and amounts of finance from other financial institutions innovation and encourages rural lending.
organisations. other institutions.
Five new financial products for project groups
Recovery rate of bank loans and UPASAC Investments
Lessons in development of hill Lessons documented and disseminated via media and Project progress reports Project generates lessons which are
communities learned and disseminated. meetings. widely applicable.
Outputs:
Strengthen food production systems 93,000 people1 trained & get other livelihood support Project progress reports Improved technologies for hill agriculture
Support cash crops, market-orientated 18,000 producers1 benefit from value chains. are available & profitable.
enterprises, tourism & institutions 80 market access infrastructure facilities provided. Private sector & other value chain
Develop market & other infrastructure 60 producer organisations involved in value chains. participants are interested.
Provide opportunities for vocational 10,000 people1 complete vocational training. Public sector input supply channels
training function efficiently, or allow space for
private suppliers.
Soil and water conservation. Watershed 29,000 producers1 reached with improved technologies, Project progress reports Communities are interested and willing to
management capacities strengthened irrigation, better communications and soil conservation. prioritise watershed development.
Livelihoods developed 125,000 ha covered by watershed conservation and GP’s able to play their role in
development. implementing watershed development
Social venture capital company able to UPASAC business plan Project progress reports Suitable staff can be recruited to
provide financial resources 1,000 people attend training and exposure visits. UPASAC.
Other financial institutions strengthened 10 financial institutions participating in ILSP linkages. Financial institutions willing to participate.
to provide loans and other services. 20 new branches of SKGFS opened.
Effective and efficient systems for Achievement of project targets at output and outcome Project progress reports GoUK & IFAD establish efficient
delivery of project outputs levels. management framework.
Activities/components
Food security and livelihood enhancement: Support for crop and livestock production via technology demonstrations and training, development of service providers, physical
infrastructure for market access, irrigation, and soil conservation. Value chain sub-projects including market/sub-sector studies, introduction of new technologies, market linkage,
skill development, product development and promotion, physical infrastructure for market access. Action-research and innovation sub-projects. Vocational training,
apprenticeships and job placement services - implemented by UGVS
Participatory watershed management: watershed planning and treatment, institutional strengthening, demonstrations and training, market linkages – implemented by PSWMD
Livelihood finance: provision of debt and equity capital for enterprise start-up, piloting of risk management instruments, support for financial institutions – implemented by UPASAC
Project management Project management unit established, staff recruited, agreements with partner agencies, project coordination, monitoring and evaluation, knowledge
management – implemented by RDD
1 indicators disaggregated by gender